Aluisi v. Elliott Manufacturing Co.

The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge

ORDER CONCERNING THE COURT'S CONSIDERATION OF EVIDENCE OUTSIDE THE RECORD PLAN,

ORDER SETTING MARCH 16, 2009 TELEPHONIC CONFERENCE FOR 2:30 P.M.

BACKGROUND

In this action Plaintiff requests that the court review Defendant's denial of long term disability benefits pursuant to ERISA. The second amended complaint alleges that Unum Life Insurance Company of America ("Unum"), on behalf of Defendant Elliott Manufacturing Co., Inc. as the ERISA Plan and the ERISA Plan Administrator ("Elliott"), improperly denied Plaintiff's long term disability benefits under ERISA.

On December 19, 2008, the court and the parties held a pretrial conference. At the conference, the court and the parties determined that motions in limine were necessary prior to the bench trial in this action. The parties dispute whether Plaintiff can present, and the court can consider, evidence outside the administrative record. On December 29, 2008, the court issued its pretrial order.

On January 16, 2009, Plaintiff filed a brief in which Plaintiff contends the court can consider evidence outside the administrative record. On January 26, 2009, Defendants filed response. Defendants contend outside evidence cannot be considered. On February 2, 2009, Plaintiff filed a reply.

On February 10, 2009, the court held a hearing. At the hearing, the court heard oral arguments concerning what, if any, evidence outside the record the court can consider. This memorandum opinion follows.

LEGAL STANDARD

Where a plan grants the administrator or fiduciary discretionary authority to determine eligibility for benefits, trust principles make a deferential standard of review appropriate. Metropolitan Life Ins. Co. v. Glenn, -- U.S. -- , 128 S.Ct. 2343, 2348 (2008); Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1024 (9th Cir. 2008); Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006). If "a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a 'factor in determining whether there is an abuse of discretion.'" Glenn, 128 S.Ct. at 2348 (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)); Nolan v. Heald College, 551 F.3d 1148, 1153 (9th Cir. 2009); Burke, 544 F.3d at 1024. As is the case here, an employer has a conflict of interest when it both funds the plan and evaluates claims, and the court must take this conflict into account when it reviews the decision to deny benefits. Glenn, 128 at 2348; Firestone, 489 U.S. at 115; Burke, 544 When the court reviews the lawfulness of benefit denials, the court will often "take account of several different considerations of which a conflict of interest is one." Glenn, 128 S.Ct. at 2351. The court is "to temper the abuse of discretion standard with skepticism 'commensurate' with the conflict." Nolan, 551 F.3d at 1153; Abatie, 458 F.3d at 959, 965, 969. The Supreme Court explained as follows:

In such instances, any one factor will act as a tiebreaker when the other factors are closely balanced, the degree of closeness necessary depending upon the tiebreaking factor's inherent or case-specific importance. The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a history of biased claims administration. See Langbein, supra, at 1317-1321 (detailing such a history for one large insurer). It should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits. See Herzel & Colling, The Chinese Wall and Conflict of Interest in Banks, 34 Bus. Law 73, 114 (1978) (recommending interdepartmental information walls to reduce bank conflicts); Brief for Blue Cross and Blue Shield Association as Amicus Curiae 15 (suggesting that insurers have incentives to reward claims processors for their accuracy); cf. generally J. Mashaw, Bureaucratic Justice (1983) (discussing internal controls as a sound method of producing administrative accuracy).

Glenn,128 S.Ct. at 2351.

The general rule is that "when applying an abuse of discretion standard to an ERISA plan, the district court's review is limited to the administrative record." Burke, 544 F.3d at 1027-28 (quoting Abatie, 458 F.3d at 970). However, the court may consider evidence outside the administrative record "to decide the nature, extent and effect on the decision-making process of any conflict of interest " Nolan, 551 F.3d at 1153; Burke, 544 F.3d 1028; Abatie, 458 F.3d at 970. "Similarly, the district court may consider evidence outside the administrative record if it determines that procedural irregularities prevented the full development of the administrative record." Burke, 544 F.3d at 1028; Abatie, 458 F.3d at 970.

DISCUSSION

Plaintiff seeks to introduce two types of evidence. First, Plaintiff seeks to introduce evidence showing Unum's history of biased claim denials. Plaintiff contends this evidence will be derived from other published cases and sources relating to Unum. Second, Plaintiff seeks to introduce testimony by his primary treating physicians and Plaintiff to establish that if Defendant had thoroughly questioned them or conduct an independent medical evaluation, Defendants would have easily seen Plaintiff is disabled.

A. Unum's History of Biased Claim Denial

Plaintiff seeks to introduce the fact that UNUM has a long, well-documented history of biased claims administration. Plaintiff asks that the court consider several court cases that have referenced Unum's claims administration history. Defendant makes several evidentiary objections to this court's consideration of these other courts findings.

1. Judicial Findings of Biased Claims Administration

Several court cases have cited to Unum's claims administration history. Concerning Unum's prior history of biased claims administration, the Ninth Circuit has stated:

This nationwide vote of no confidence seems to have been precipitated by the cupidity of one particular insurer, UnumProvident Corp., which boosted its profits by repeatedly denying benefits claims it knew to be valid. UnumProvident's internal memos revealed that the company's senior officers relied on ERISA's deferential standard of review to avoid detection and liability.

Saffon, 511 F.3d at 1210. The Supreme Court has also recognized Unum's history. In discussing facts that can show a conflict of interest and what weight district courts have given these facts, the Supreme Court has found that a conflict of interest "should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a history of biased claims administration. Glenn, 128 S.Ct. at 2351 (citing John H. Langbein, Trust Law As Regulatory Law: The UNUM/Provident Scandal and Judicial Review of Denials Under ERISA, 101 Nw. U.L.Rev. 1315 (2007) (hereinafter "Langbein Article")). The insurance company referred to by the Supreme Court is Unum. In Harper v. UNUM Life Ins. Co. of America, 2008 WL 5245971 (E.D.Cal. 2008), this court considered the fact that Unum has a documented history of biased claims administration as a finding of fact. This court cited to Saffon v. Wells Fargo & Co. Long Term Disability Plan, 511 F.3d 1206, 1210 (9th Cir.2008); Cowder- Cowin v. Unum Life Ins. Co. of Am., 560 F.Supp.2d 1006, 1013 (W.D.Wash. 2008); Glenn, 128 S.Ct. at 2351 (citing Langbein Article).

Defendant contends that these court findings are based on only one law review article, the Langbein Article. Defendant complains that the Langbein Article is biased and not supported by the evidence. The court has reviewed the Langbein Article and finds that many of its conclusions are based on other courts' factual findings. The Langbein Article cites to cases that have addressed Unum's denial practice. The Langbein Article cites to court opinions in which the courts have found, under the facts at issue in the case before the court, there was selective review of the record, see Moon v. UNUM Provident Corp., 405 F.3d 373, 381 (6th Cir. 2005), "lack of objectivity and an abuse of discretion by UNUM," see Lain v. UNUM Life Ins. Co., 279 F.3d 337, 347 (5th Cir. 2002), misuse of ambiguous test results, see Stup v. UNUM Life Ins. Co. of Am., 390 F.3d 301, 310 (4th Cir. 2004), and claims evaluation practices that defied common sense, see Dandurand v. UNUM Life Ins. Co. of Am., 284 F.3d 331, 338 (1st Cir. 2002), and "bordered on outright fraud," see Watson v. UnumProvident Corp., 185 F. Supp. 2d 579, 585 (D. Md. 2002). See Langbein Article at 1320. While these cases concern only the facts before them, the Langbein Article cites to another court that reviewed many cases and found a disturbing pattern. See id. (citing Radford Trust v. First Unum Life Ins. Co., 321 F. Supp. 2d 226, 247 (D.Mass. 2004). The court finds that the Langbein Article contains sufficient citation to court cases for the court to find the ...

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